Financials
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News and Views
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Macro/Technicals
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Active Names
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Sector News, M&A, Capital Raises
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Research Away
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Cantor Flows
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News and Views
After a very slow week of trading and despite Bernanke saying the recovery is “far from complete”, the financials finished on a positive note, finishing up 1.97%. Leading the sector is service names, up as high as 3%, headlined by credit cards expectation to earn nearly $10B more this year than predicted Banks reached as high 2.25%, with regional banks leading the way as the KRE finished up 2.03%. Goldman was the lone black eye in the sector as talk of the SEC taking more action, it’s the only “bank” trading above book value, and monthly trading weakness. Insurance got a spark from speculation Manu is bidding $32.50 for LNC, which went on finish up 9%. Meredith reiterated her stance on banks needed more capital to withstand a renewed drop in the housing market.
Macro/Technicals
Leaders: DLLR+26.63%,LNC+10.27%,SBX+9.63,MBI+8.42%,NEWS+7.26%,NNI+7.06%
Laggards: GS-1.45%
Active Names
Big Banks - BAC, C, WFC, JPM, GS, FITB, HCBK, PBCT
Mid/SmallcapBanks/S&L- FBP, RBPAA, CVBF, PCBC, CARE, OZRK, RNST, SNV
Brokers AMTD, ETFC
Asset Managers/Inv co’s- FIG, AMP
Insurance- GNW, HIG, ALL, LNC
CreditCards- AXP, COF, MA, V, DFS
Specialty Finance/Mort Insurers- ABK,MBI
Sector News, M&A, Capital Raises
GS: largest shareholder Axa cuts Goldman stake by half -’ slashed its stake by more than half in the last quarter as the bank contended with civil fraud charges by US securities regulators and brutal market conditions that crimped its results – reduced from about 5 per cent to 2.1 per cent
o On Wall Street, a Jump on Bonuses – WSJ link
o With the specter of higher taxes looming in 2011 and banks still reeling from last year's U.K. bonus tax, executives at some financial-services companies are considering whether to pay year-end bonuses, traditionally doled out starting in January, sooner.
o Managing directors at Credit Suisse Group in London learned last Wednesday that they would receive a late-summer reward that will restore at least some of the money they sacrificed last year when the bank cut payouts in response to the one-time U.K. bonus tax.
o Barron's feature discusses the futures of Fannie Mae (FNMA) and Freddie Mac (FMCC)
The article does not cover a lot of new ground on this well-worn topic, mainly sticking to an overview of the firms arrived in their current wounded state and covering recent discussions of what to do with the firms. While ideas about their future form vary, there does seem to be general agreement that they need to be smaller, either wholly public or wholly private and that achieving any of these goals will prove difficult. Further, any talk of reform is unlikely to arise ahead of this year's mid-term elections. Of interest, the article does highlight a "back-of-the-envelope calculation" from Moody's Mark Zandi that the firms will likely need a minimum of $100B in capital in the years ahead to cover future losses tied to housing market weakness and unemployment trends.
o ECB Likely to Extend Emergency Banking Industry Aid, FT Says
o The European Central Bank is likely to extend emergency aid for the region’s banking industry into next year even though growth in the 16 countries using the euro has exceeded forecasts, the Financial Times reported, without saying where it obtained the information
o AIG Ex-Taiwanese diplomat setting up $2.5B bid for Nan Shan – Reuters
o http://www.reuters.com/article/idUSTRE67T06V20100830
o AIG WSJA(8/30) Timing Looks Difficult For AIA Offering
o Those involved in taking the main Asian life-insurance unit of American International Group Inc. public are firm as a back brace on the timetable for their Hong Kong listing. Sometime in October, they say, AIA will go public, raising a sum as yet undetermined, though the likely target lies somewhere north of $15 billion. The percentage of the company that would be sold also is uncertain. An official filing to the Hong Kong stock exchange is expected in the first half of September.
o Barron's Cover story: Annual list of the top 100 independent financial advisors. - Barron's
o US banks: WSJ(8/28) S&P On U.S. Banks: The Worst Seems Over
o Standard & Poor's Ratings Services said the worst appears to be over for the U.S. banking industry, though a sluggish economy and continuing real-estate issues -- combined with regulatory uncertainty -- mean the sector isn't likely to see a quick rebound.
o US banks: Whitney: banks not ready for double dip
o Banks will need more capital to withstand the continuing decline in the housing market, according to analyst Meredith Whitney.
o Banks aren't prepared for a "double dip" in housing, which "it looks like we are having," Whitney said Friday.
o KFS Kingsway Financials board has called a special meeting of shareholders to be held on 28-Oct
o auto loans -Spain's Banco Santander SA (STD) late Friday said it has reached an agreement to buy HSBC Holdings PLC's (HBC) portfolio of auto loans for about $4 billion. DJ
o CME: The Commodity Futures Trading Commission has spoken with the Justice Department about the futures regulator's antitrust inquiry into CME Group Inc.'s conduct in its Treasury-futures business, WSJ
o Lincoln National. (LNC) shares jumped more than 8% Friday on takeover speculation. Rumors that Toronto-based insurer Manulife Financial Corp. (MFC) offered to acquire Lincoln National for $32 a share fueled a rally in the stock, DJ
o Direct Line, the British insurer owned by Royal Bank of Scotland has reportedly attracted interest from many prospective buyers. The Sunday Times reported that RBS is thinking about selling lossmaking Direct Line at a bargain price; plans for a flotation are believed to have been shelved because of losses. The interested parties include Warren Buffett's Berkshire Hathaway vehicle and Allstate. It added that any buyer is expected to pay significantly less than GBP 4.5bn; the price offered for Direct Line two years ago by CVC. RBS is weighing its options and during the past few days has been interviewing advisers to act on the sale of Direct Line
o More Go Without Life Insurance – WSJ link
o Nearly a third of U.S. households have no life-insurance policies, due to a combination of the financial pressures, the high cost of some policies and the hardball tactics used by some agents.
o Agricultural Bank of China (1288.HK) down 2% after it reported H1 results in line with expectations
o Moody’s Ask Municipalities for Indemnity on Ratings
§ Moody’s Investors Service is asking local governments to indemnify the bond-rating company and its executives from legal action connected to its ratings except for instances of fraud or willful misconduct.
Research Away
BK, STT, NTRS Gsco lowers price targets
AGO – Macquarie lowers price target
NDAQ – BMO Capital raises price target
Cantor Flows
Big Banks - BAC, C, WFC, JPM, GS, FITB, HCBK, PBCT
Mid/SmallcapBanks/S&L- FBP, RBPAA, CVBF, PCBC, CARE, OZRK, RNST, SNV
Brokers AMTD, ETFC
Asset Managers/Inv co’s- FIG, AMP
Insurance- GNW, HIG, ALL, LNC
CreditCards- AXP, COF, MA, V, DFS
Specialty Finance/Mort Insurers- ABK,MBI